Google admits that queries in AI Mode generate less advertising revenue than traditional searches. The company’s response is not to remove AI from its search engine, but to expand the ads that appear alongside its answers and bring them to more countries. The move aims to open a new monetization channel just as Search’s advertising business is losing momentum.
The problem is not that search has stopped growing. In the third quarter, Google Search revenue rose 12% year over year, according to TechCrunch, compared with 17% in the second quarter and 19% in the first. The question is how much value Google can extract from each query if more and more users resolve their questions within an AI-generated answer, without navigating a results page full of links.
A more useful answer can leave less room for ads
AI Overviews presents AI-generated summaries within search results; AI Mode offers a conversational search experience. Both features aim to answer directly rather than simply show links. That change can improve the experience for someone who finds what they need right away, but it alters the business model that has sustained search: if users do not need to keep exploring, there are fewer opportunities to show ads or get them to interact with them.
Philipp Schindler, Google’s chief business officer, linked the increase in AI Mode queries with the format’s lower monetization. On the investor call, he explained that the company was seeing lower advertising revenue in that mode, although he also said its initial tests had produced promising results.
“It’s worth noting that the strong growth in AI Mode queries had an impact due to the lower monetization we were seeing in this mode.”
— Philipp Schindler, Google’s chief business officer
The company describes a specific tension: use of its AI search is growing, but the format does not yet produce the same advertising returns as classic search. Xataka notes that AI Mode monetizes less effectively; meanwhile, Search revenue figures reported by TechCrunch show that advertising growth has slowed over the three quarters compared. The figures do not prove that AI is the only cause of that slowdown, but Google has identified AI Mode monetization as a factor.
Alphabet recorded $127.6 billion in revenue for the quarter, up 25% year over year, according to TechCrunch. Within Google Services, the division that includes Search, revenue was $96.3 billion, up 11%. The company is still growing; the pressure lies in turning the increase in AI queries into advertising revenue comparable to that of the format it is displacing.
More markets and ads within the conversation
Google announced that it will expand AI Mode ads to international markets and scale up advertising in AI Overviews as well. In the United States, the expansion includes ads in multi-turn conversations. The decision extends a strategy that had already incorporated Gemini formats for conversational discovery and sponsored recommendations within AI-generated answers.
The difference from an ad placed among links matters for user trust. An AI answer can sound like an impartial explanation; a commercial recommendation included in it may seem like part of that explanation, even though it is advertising. The more integrated the promotion is, the harder it becomes to separate the usefulness of the answer from its commercial interest. Google wants ads to be relevant, but the challenge is doing so without undermining the answer’s credibility.
The company says the early indicators are encouraging. Schindler said the click-through rate for sponsored product listings in AI Mode is already comparable to that of organic results, and that Google’s research indicates users consider those ads relevant. This is a figure for those specific listings, not a measure of all AI Mode ads or proof that the new format generates the same revenue per query as traditional search.
The change also alters the type of interaction Google wants to monetize. Sundar Pichai said queries in AI Mode are, on average, three times longer than traditional searches. One in five global searches in that mode includes voice, images, or documents, and Google handles more than 50 billion visual searches a month, according to TechCrunch. The search engine is receiving longer, multimodal queries; the company wants to insert advertising into that journey, not just alongside a list of results.
For companies that buy ads, this opens up new formats—such as sponsored product listings and integrated recommendations—but the available figures do not allow us to conclude how their costs or campaign performance will change. For content publishers, the move raises another uncertainty: if an AI answer satisfies users without them visiting the links, appearing in search results may not translate into a visit. The data cited here do not quantify this effect on external clicks.
The trade-off Google is trying to resolve
The advertising expansion is a bet on adapting the business to the product the company itself is promoting. Scaling back AI Mode would reduce the pressure to insert ads into conversational answers, but it would run counter to the growth of that experience. Expanding advertising, on the other hand, may improve its monetization while making an answer seem less neutral. Google has chosen to keep scaling both at once.
The financial context explains the urgency, but does not amount to a crisis. Search revenue is still rising and Alphabet reported overall growth for the quarter; even so, search advertising grew more slowly than in the previous two quarters. Google also said Search queries grew at their fastest year-over-year pace in five years, although Pichai did not give a specific rate. The company has more activity to monetize, but it has not shown that AI Mode already matches the performance of traditional search.
The test for Google will be to sustain the use of AI answers while expanding advertising without blurring the line between information and promotion. Its next step is already set: more ads in AI Overviews and AI Mode, including in international markets; what remains to be seen is whether that inventory can make up for the lower monetization the company acknowledges in conversational mode.
Sources: Xataka, TechCrunch
